What will the next I Bond rate be? November 2010

With the inflation portion of the next bond’s rate set at .37%, we can now list out the possible composite rates based on various fixed rates. The fixed rate portion only matters for new bonds purchased between November and April 2011 as all bonds issued prior to that will retain the fixed rate they were issued with.

The current fixed rate is .20%. Buying an I Bond now would allow you to get the current 1.74% rate through to April, when it would change to 0.94%.

 

Theoretical Fixed Rate	Composite Rate
0.00%	0.74%
0.10%	0.84%
0.20%	0.94%
0.30%	1.04%
0.40%	1.14%
0.50%	1.24%
0.60%	1.34%
0.70%	1.44%
0.80%	1.54%
0.90%	1.64%
1.00%	1.74%
1.10%	1.84%
1.20%	1.94%
1.30%	2.04%
1.40%	2.15%

 

Based on the FDIC, the current average savings account rate is 0.18% while a 60 month CD averages out to 1.66%, so I Bonds remain competitive to cash accounts. (http://www.fdic.gov/regulations/resources/rates/historical/2010_10_18.html)

CPI-U for September released

The CPI-U value for September was released. The new value of 218.439 is up slightly from August’s value of 218.312. More importantly, we now have the full 6 month view of CPI-U used in the November I Bond’s rate.

Based on the March value of 217.631 and September value of 218.439, we know that the inflation-linked portion of the November I Bond will be 0.37%.

March	April	May	June	July	Aug.	Sept.
217.631	218.009	218.178	217.965	218.011	218.312	218.439

August CPI-U Rate

The August CPI-U value increased to 218.312 over July’s value of 218.011.

 

March	April	May	June	July	Aug.	Sept.
217.631	218.009	218.178	217.965	218.011	218.312

 

With only one month remaining for the November I Bond rate to be determined, the inflation for this period remains very low. If the calculation was based on today’s values, the CPI-U increase would be only 0.31%. If the fixed rate of 0.2% continued, the combined I Bond rate would be a mere 0.82%.

The CPI-U increased for last September through March resulted in a 0.77% CPI-U linked rate. It seems unlikely that the November rate will be higher than today’s 1.74% I Bond.

CPI-U August 2010
I Bond Rates

July CPI-U Value

The CPI-U value for July rose ever so slightly from June’s value of 217.965 to 218.011.

 

March	April	May	June	July	Aug.	Sept.
217.631	218.009	218.178	217.965	218.011

 

For those of you interested in following the CPI-U, I recently launched CPI-U.info, which has all historical CPI-U values, as well as charts and statistics for each year.

June CPI-U Update

The June CPI-U value dropped slightly from May’s value of 218.178 down to 217.965.

The CPI-U increase after 3 months has only been about 0.15% with only 3 months remaining before the next I Bond inflation rate can be calculated.

March	April	May	June	July	Aug.	Sept.
217.631	218.009	218.178	217.965

April and May CPI-U Values

The next I Bond rate will be based on the change in CPI-U between March and September. The value rose to 218.009 in April and again in May up to 218.178.

 

Mar.	Apr.	May.	Jun.	Jul.	Aug.	Sep.
217.631	218.009	218.178

New I-Bond Rate for May 1, 2010: 1.74%

The new I-Bond rate has been released for May 1, 2010 through October 31, 2010.

With a fixed rate of 0.20%, the new composite rate will be 1.74%.

We previously knew that the CPI-U increase of 0.77% would result in a variable rate of 1.54%. Now that the fixed rate of 0.20%, the composite rate is 1.54% + 0.20% = 1.74%.

I-Bonds that have already been issued will change to the new variable rate on the 6-month anniversary of the issue month of the bond.